Bipartisan Bill Reintroduced to Prevent Student Loan Borrower Default

By Maria Carrasco, NASFAA Staff Reporter

A bipartisan group of lawmakers reintroduced legislation that would aim to help student loan borrowers avoid default by automatically enrolling delinquent borrowers in income-driven repayment (IDR) plans and streamlining the renewal process.

The update to the SIMPLE Act — Streamlining Income-driven, Manageable Payments on Loans for Education —  was introduced by Reps. Suzanne Bonamici (D-Ore.) and Brian Fitzpatrick (R-Pa). Bonamici introduced bills by the same name during previous congressional sessions.

The legislation would take advantage of data-sharing authority granted in the FUTURE Act to establish an information-sharing system between the Department of Education (ED) and the Treasury to automatically enroll struggling borrowers in IDR plans so they can repay their loans based on financial ability. Information already on file at ED and Treasury would connect borrowers automatically with existing IDR plans, according to a summary of the legislation

Additionally, the legislation would require ED to use income information on file at Treasury to send notices to borrowers in danger of defaulting that show the lower monthly payments available to them under IDR plans. The bill would also eliminate annual paperwork for updating income information while enrolled in an IDR plan, as the data sharing would allow for automatic recertification. 

Previously, the Consumer Financial Protection Bureau and the Government Accountability Office have suggested IDR plans have been underutilized due to the application process for enrolling in the first place. Additionally, the annual recertification process for IDR plans could serve as a barrier to struggling borrowers. 

“The bipartisan SIMPLE Act will streamline the enrollment process for income-driven repayment plans, making it easier for borrowers to access affordable payments and avoid catastrophic defaults. It is unacceptable that people who invested time and resources in their education have to navigate a needlessly complicated student repayment system,” Bonamici said in a statement. “The decision to go to college shouldn’t lead to financial ruin, and I’m glad to work across the aisle to find an urgent, common-sense solution to the convergent crises of growing student debt and diminishing college affordability.”

NASFAA, along with other higher education organizations including The Institute for College Access & Success, Third Way, and New America, support the legislation. 

“Income-driven repayment plans offer a lifeline for millions of student loan borrowers, making repayment more affordable and helping struggling borrowers avoid default,” said NASFAA President and CEO Justin Draeger. “Unfortunately, the complexities of enrolling and remaining in IDR keep many vulnerable borrowers from accessing this important safety net. The SIMPLE Act would expand access to affordable income-driven repayment options by automatically enrolling struggling borrowers in IDR plans before they experience the punitive consequences of default. The bill also eliminates burdensome annual paperwork requirements, making it easier for borrowers to remain enrolled in IDR. The financial aid community stands in support of this bill.”


Publication Date: 7/28/2022

David S | 7/28/2022 11:0:11 AM

If IDR's are the solution to so many problems, and awareness of them is lacking, and the enrollment process confuses too many borrowers, why not just make IDR the default (that admittedly isn't a great word to use in the context of student loan repayment, but you know what I mean) and put all borrowers in IDR unless/until they initiate action to enter a different plan? Yes, such plans accumulate more interest, but not necessarily if Congress or ED simultaneously takes measures to eliminate negative amortization.

One of the few things both sides of the aisle agree on is that student loan repayment needs to be simplified. It's not hard to figure out how to fix it. So fix it.

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